Islamic Banks' Return on Depositors and Conventional Banks' Deposit Interest: Is there Causality? Evidence of Causality from Bangladesh.

Authors

  • Abdus Samad Utah Valley University
  • Mohammad Ashraful Ferdous Chowdhury Shahjalal University of Science & Technology

Abstract

The critiques of the Islamic bank allege that the depositors' return and the return on loans of the Islamic bank is nothing but the interest rate of the conventional banks and they simply follow the conventional banks interest rate. This paper empirically investigates the causal relation and the causal direction between the conventional banks' interest rate and the Islamic banks' return applying VEC model. The results of the VER Granger Causality/Block Exogeneity Wald Tests show unidirectional causal relation and the direction of causality ran from the Islamic banks' rate of return to the conventional banks' interest rates.

Keywords: Conventional Bank Interest rate, Islamic Bank deposit and loan rate, Granger causality, Bangladesh

JEL Classifications: G21; F31

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Author Biography

Abdus Samad, Utah Valley University

Abdus Samad, US Fulbright Scholar and Scholar of the Year 2013, Woodbury School of Business, Utah Valley University, obtained Ph.D. (Econ) from the University of Illinois-Chicago, USA, M.A. (Econ) from Lakehead University, Canada, and B.A. (Honor) and M.A. (Econ) from Rajshahi University, Bangladesh.Dr. Samad is currently a Professor of Economics in the Department of Finance & Economics at Utah Valley University, Orem, USA. He is an author of 60 articles published in the national and internal refereed journals. He attended and presented numerous papers of economics and finance to the national and international conferences.He taught graduate and undergraduate programs at many universities including University of Illinois-Chicago, Northwestern University, University of Wisconsin, International Islamic University Malaysia, and the University of Bahrain

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Published

2017-10-31

How to Cite

Samad, A., & Chowdhury, M. A. F. (2017). Islamic Banks’ Return on Depositors and Conventional Banks’ Deposit Interest: Is there Causality? Evidence of Causality from Bangladesh. International Journal of Economics and Financial Issues, 7(5), 432–439. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/5157

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